By Lisa Seachrist
Anika Therapeutics Inc.'s stock plummeted Wednesday on news its osteoarthritis therapy, Orthovisc, failed in a Phase III clinical study and that the U.S. Securities and Exchange Commission had issued a formal order of investigation.
The Woburn, Mass.-based company's stock (NASDAQ:ANIK) lost 65 percent, or $4.75, to close at $2.50. The company is evaluating whether to continue development of Orthovisc for the U.S. market. The product is available in Europe, Canada and other countries.
"The trial was designed to show reduction of pain in knees on a relative basis to a saline control," said Douglas Potter, vice president and CFO for Anika. "The difference wasn't statistically significant and that was the shock, because we were quite confident it would be."
The failure of this trial was the second setback for Orthovisc, an injectable hyaluronic acid preparation. In late 1998, the FDA determined the clinical trial data the company had in hand wasn't sufficient for approval. As a result, the company initiated a Phase III study of 385 patients at 22 centers in the U.S. and Canada to test Orthovisc's ability to treat osteoarthritis of the knee.
Orthovisc is partnered with Zimmer Inc., a subsidiary of New York-based Bristol-Myers Squibb Co., which has rights in the U.S., Canada, Asia-Pacific markets, Europe and Latin America.
Patients received three injections of either Orthovisc or saline over a two-week period and were followed for six months following the treatment. Orthovisc, a high-molecular-weight, highly purified, naturally derived form of hyaluronic acid (HA), is designed to coat, lubricate and protect joint tissues, providing the viscoelastic and cushioning properties of natural HA found in the synovial fluid of healthy joints.
"We looked for the reduction in a pain score - the WOMAC score," Potter said. "It became very clear from the initial data that we weren't going to meet that goal."
Potter said the company needed to analyze the data and evaluate why the trial didn't give the expected results before making any decisions on whether or not to proceed with U.S. development of Orthovisc.
"It is unfortunate," Potter said. "Orthovisc represented a substantial market for us had it been approved."
Anika also said Wednesday an ongoing SEC investigation had resulted in a formal order of investigation. That move grants the SEC full subpoena power. At issue is the company's accounting of sales of its product under a long-term supply and distribution agreement. The initial investigation resulting in Anika restating its financial results for 1998 and the first three quarters of 1999.
"We're not sure where they are headed with this," Potter said. "You never really have complete visibility into the process. We have cooperated with the investigation and continue to do so."
Despite all of the bad news, Potter said the company was financially sound and moving forward with its business plan. He noted the company had revenues from foreign sales of Orthovisc, but an even greater source of revenue comes from the sale of Amvisc and Amvisc Plus - HA products for use in ophthalmic surgery.
"The company is financially in good shape," Potter said. "There is an ongoing business that has adequate cash. We just need to take stock of the situation and move forward."
Potter noted the company also had two products in preclinical development: Incert, a family of HA products designed to prevent post-surgical adhesions, and Ossigel, an injectable formulation of basic fibroblast growth factor combined with HA, designed to accelerate healing of bone fractures.
"Our corporate strategy is to develop therapeutic products and devices intended to promote tissue repair, protection and healing," Potter said. "HA is a very good technology to do this."